Contango's Kenneth Peak on the Gulf of Mexico

The chairman and CEO of Contango Oil & Gas Company, Kenneth Peak, gave a presentation today at an oil and gas conference in London that is accessible on the Web. It's a pretty interesting little company: seven employees, ten natural gas wells, and a market capitalization of about $800 million. Here's part of what he had to say about drilling in the Gulf of Mexico:

The sword of Damocles, I get asked and I'm going to be asked a lot, what's going to happen here? And I think it's possible that this administration and this Congress could, in fact, force us all out of the offshore. I don't think so. I think at some point the adults will step in and they'll bring some mature reasoning to the importance of the offshore business, not only to the coastal states and Louisiana, in particular, but the revenues that we pay in terms of royalties and our lease bonuses are the second largest source to the federal government after the federal income tax.

There are too many boats and there are too many jobs at stake. So at some point, I think they'll take their boots off the throat of people and they'll stop looking for – I'm just – I'm going to quote the President, even though this is a family friendly audience, stop looking for someone's ass to kick and maybe focus on how they can be part of the solution instead of throwing rocks at people when they are working hard. I'm personally embarrassed – and I'm standing in England, so I'll go ahead and say it – of the way, the things that our government has been saying about British Petroleum. That's not their job to try to determine whether or not a private company wants to pay a dividend. That's the job of the Board of Directors. And I don't think Senators really have much idea of really how to create value and how to run a company. They certainly don't have any idea how to balance a budget.

We're going to have more safety procedures. I welcome those. We're going to have safer fail safes. I welcome those. We already perform at what I believe is a very high standard of safety. But if someone can figure out a way to do it safer and better, I'm all for that. I don't care if it costs more, don't care if permits take longer. We will live with that. But where I do get upset is if mistakes in judgment or equipment fails, if that becomes criminalized, we're gone – we won't be in the Gulf of Mexico and neither will any other CEO want to go to jail for a piece of equipment not working. And also we're not going to be around if it's unlimited. If every time we drill a well in the – a wildcat well in the Gulf of Mexico, I'm being asked to bet my billion dollar net worth, my company, that we are not going to make – that there's not going to be a mistake or an error in judgment, we won't play in that game. And I don't think too many other people will either. So they get to set the rules, but it's still a free society and we get to decide whether or not we want to play.